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Public Enterprises Clarifies Issues Around Eskom World Bank Loan Application

April 9, 2010

Department of Public Enterprises

The department of public enterprises has released a statement outlining government’s response to questions on the Eskom loan application to the World Bank.

The World Bank board is to consider the application on 8 April. Eskom seeks $3.75 billion from the bank to finance its capital expenditure programme.
According to the department, the loan was sought to enable South Africa to meet its energy security needs in the “most cost effective and sustainable manner”.

Reference is made to South Africa’s commitment to the Copenhagen accord. The country is committed to reducing emissions by 34% below the “business as usual” level by 2020 and 42% by 2025.

Government’s energy strategy is described as seeking to meet South Africa’s generation capacity needs while at the same time pursuing higher levels of energy efficiency. Renewable energy is also a priority.

Government aims to ensure that carbon emissions peak between 2020 and 2025, plateau for a decade and then start to decline as part of its long-term mitigation scenarios.

In the statement, the department declares that the questions raised by stakeholders and the subsequent responses are published in the interests of “transparency and good governance”.

Issues covered include what measures will be put in place to offset carbon dioxide emissions from Medupi, how remaining funds would be used, removing barriers hindering energy efficiency and renewable energy programmes, the de-commissioning of older plants, environmental technology at other plants and the status of South Africa’s integrated resource plan.

In terms of offsets, the department stressed that government’s strategy focused on reducing carbon emissions rather than pursuing offsets.

The World Bank has indicated that an additional $1.25 billion would be made available following a decision on the current application. The department emphasised that the additional funds would be used to support emission reduction measures.

Barriers and enablers to energy efficiency and renewable energy programmes would be discussed within the second integrated resource plan (IRP), presently in its formulation phase. A study funded by the World Bank to identify barriers had already commenced.

Any de-commissioning of older plants would occur over the medium term. The IRP2, to be tabled in Parliament during 2010, would contain detail on a de-commissioning strategy.

Eskom was also committed to upgrading technology at its power plants. R1.5 billion had been earmarked over the next three years to “address the management of coal utilisation and for the retrofit of technologies which will bring the emission limits in line with new legal requirements”.

IRP2 was currently involved in further consultation as requested by the cabinet at the beginning of 2010. An inter-departmental task team was overseeing this process.

The department also indicated that a target of 100% electricity service connections to all South Africans by 2014 was in place. Last year a 81% level was achieved.